Access to Mandatory Retirement Savings in Times of COVID-19: Public Policy Considerations

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May 2020
In the context of the coronavirus pandemic and its impact on the loss of work income, this note briefly discusses the international experience with regard to early access to pension funds, analyzing its advantages and disadvantages. Three are the main messages. First, in normal situations, allowing a degree of liquidity for pension funds presents a policy dilemma between building a pension and providing the individual with liquidity in the face of income shocks. It is up to each country to weigh this dilemma. International experience has good examples of how this degree of liquidity can be achieved, but it also shows that the vast majority of countries that allow access to funds outside of Latin America and the Caribbean do so on voluntary / complementary pillars, or they have additional pillars to provide a basic pension for the vast majority of older adults. Second, in the current recession context, access to pension funds should be a tool of last resort, and losses associated with financial market volatility should be avoided. Third, this document highlights some design and implementation principles, based on international experience, that could mitigate the impact on the future adequacy of pension systems if it is not possible to avoid this policy measure due to lack of other instruments. Finally, as this note emphasizes, it is very important to ensure that payment mechanisms are safe for the citizen in the context of the current pandemic.